For years there has been a question on the issue of Condominium’s collecting condo fees on a caveat that was filed more than two years prior to a foreclosure action filed to collect those fees. Did the caveat protect ALL of the arrears owing, as the Condominium Property Act (CPA) suggests? Or did the Alberta Limitation Act restrict condominiums to only two years of prior arrears from the date the foreclosure action was filed? In The Owners: Condominium Plan No. 9311533 v Shui Ming Tong Foundation, 2022 ABKB 826, The Alberta Court of King’s Bench considered both.
The defendant owner fell into arrears in February 2017. The Plaintiff Condominium filed a caveat against title pursuant to what is now section 39.2 of the CPA in March 2019 before commencing a foreclosure action in April 2022, almost three years after the filing of the caveat.
The Condominium took the position that since the caveat protects all unpaid contributions and interest owing upon filing of the caveat under 39.2(7) of the CPA, the foreclosure action should include all unpaid contributions, even if they are more than two years old. The Court disagreed, noting that the Condominium could have commenced the proceedings for a remedial order within two years of the arrears arising but did not do so. On this issue, the Court determined that the Limitations Act applied and the Condominium could not use the foreclosure action to collect any arrears that were more than two years old (starting from the date of commencement of the foreclosure action).
However, with respect to the right of the Condominium Corporation to maintain the caveat, the Court confirmed that even if the defendant owner pays all of the outstanding arrears that are not limitation barred and the foreclosure action is discontinued, the defendant is not able to compel discharge of the caveat on title. This is because the some of the fees remain outstanding and the CPA and caselaw clearly state that the caveat shall only be discharged upon ALL amounts due and owing being paid. Accordingly, even after a foreclosure is over, the Condominium can maintain the caveat on title until ALL arears are paid, including arrears that arose more than two years before the foreclosure action was commenced.
This case emphasizes the importance of ensuring that the steps to collect on unpaid contributions are taking in a timely manner. While the registration of a caveat does protect unpaid contributions for a condominium corporation, a foreclosure action can only be commenced for two prior years worth of unpaid contributions. It does also raise the spectre of some potentially strange results. For example, what if the owner of the unit never sells or refinances? This may be more likely in a corporate scenario, but in that case, the amount owing would continue to be owed – for countless years. Similarly in the situation where there is a sale but no estoppel certificate is requested. In that case, again the caveat would remain on the title but there would be no legal proceeding the condominium could advance that would collect those arrears.
Finally, what happens with a foreclosure where there is a sale of the unit? Is it really necessary that a purchaser pay two separate amounts? One for the foreclosure and one for the caveat? It is likely that the result in Shui Ming Tong Foundation is not what was envisioned by the provincial government when they created the caveat/foreclosure scheme in the CPA and it may well be worthwhile to advocate for a change in the legislation that makes it clear that the Limitations Act does NOT apply to condo caveat foreclosures.
Case summary prepared by Kendra Barlow.
For assistance with any condominium matter, please contact Dionne Levesque, John McDougall, Kate Kozowyk, Stuart Gray or Kendra Barlow.